Determining a minimum wage in Egypt is not one of those new issues that arose only after the 25 January Revolution; it has long been debated by politicians and economists.
Before the revolution there was an intention to create a minimum wage, but it was not formulated until after the revolution. Currently there is one national minimum wage, established less than a year ago and until now not finalised or implemented. There are no sector or occupation-based rates.
Several studies have supported raising the minimum wage to EGP700 a month, while others suggested the higher figure of EGP1,200.
Huge wage gap
The Egyptian Centre for Economic Studies (ECES) is carrying out an in depth study in the minimum wage question, calling on experts and officials to join in the discussion. Magda Qandil, the ECES executive manager, sees the policy of minimum wage in Egypt as reflecting a defect in the wage structure that has created a gap between wages in the public sector and the legal minimum wage.
Moreover, according to the annual report issued by the Central Agency for Public Mobilisation and Statistics (CAPMAS), wages in urban areas are the highest (EGP401 per week on average), while wages in rural areas are the lowest (EGP275 per week). “This means a demographic re-distribution of activities is due,” she says.
“The average sector contribution in real growth and employment from 2008 to 2010 shows an imbalance,” Dr Qandil said. In the public sector increased employment was not proportional to productivity which, she said, explained the low wages; while in the private sector there was an increase in wages according to productivity.
Amina Helmy, deputy to the executive research manager and a veteran economist at the centre, highlighted the importance of setting a minimum wage that would not be lower than the minimum cost of living. At the same time, she added, it should not exceed 50 per cent of the average national monthly wage, since this would raise productivity costs and decrease the available job opportunities.
Related to cost of living
“In general, the wage policy should not be reformed except in connection with the social and health insurance system,” said Safwat al-Nahhas, head of the Central Agency for Organisation and Management. The system, he said, should bridge the gap between the high income of the working period and the very low income after retirement.
Dr Nahhas said that applying a policy of raising the minimum wage annually would cost five billion Egyptian pounds. So far, however, no decision has been taken by the authorities.
Gamal Bayoumi, secretary-general of the Arab Investors Union, agrees and warns against continuing on such a path. He also referred to the need to determine a maximum limit to curb very high wage levels; a move, he said which would reflect positively on the national economy as a whole.
As a general principle, former prime minister and financial expert Ali Lotfy stressed the importance of including the wage issue in the new constitution and associating it with productivity, and of determining a minimum limit to the extremes between the top and low level wages.
“It should not be about a minimum or maximum wage,” Samir Radwan, former minister of economy and expert at the International Labour Organisation said. “Rather, we should reconsider the policies of investment in general, and its demographic distribution all over Egypt.”
35 times
Late last June, the Central Bank of Egypt (CBE) submitted a draft resolution that set the maximum wage at 35 times the minimum wage for public servants, consultants and experts working on a permanent or temporary basis. The wage included the basic salary along with any bonuses or allowances.
The law obliges those who receive more than the set maximum to return the difference to the public treasury within 30 days after the end of the fiscal year, and punishes violators with hefty fines.
“This is a logical and correct decision, but it is short of determining a minimum wage where it would be easy to implement the principle of ‘35-times’,” said Salwa al-Antary, former general-manager of the National Egyptian Bank and an economics expert.
The decision was also welcomed by Fouad Shaker, secretary-general of the Union of Arab Banks, who yet hope there would not be a rash evaluation of such decisions before at least five or six months.
On the other hand, Salama al-Khouli, an expert in investment and banking finance, said the decision on the maximum to minimum wage ratio did not apply to foreign and private banks. He added that, once implemented, it would remove any tensions caused by the exaggerated disparity of salaries. It would also allow banks to make savings on their salary expenditure and thus increase gains. As for talk about losing the best workers because of the reduction of the top salaries, “this is not true;” Dr Khouli says, “Such talk is simply unsubstantiated.”
WATANI International
2 September 2012